Decoding Marital Trusts: What They Are & Why They Matter
Estate Planning for families has three main triggering events:
The incapacity of one or both spouses;
The first spousal death;
The Surviving Spouse’s death.
This blog post is about the second segment: the first spousal death. When the first spouse dies, there is an opportunity to create a Marital Trust from the Deceased Spouse’s assets to benefit the Surviving Spouse without distributing those assets to the Surviving Spouse.
Understanding how Marital Trusts work can help you be more intentional about protecting your assets, caring for your spouse, and passing value on to the next generation.
In this post I’ll cover:
What a marital trust is
Why people use it
Key features and questions to ask
Potential drawbacks and considerations
Is a Marital Trust right for you?
1. What is a marital trust?
A Marital Trust is a form of irrevocable trust that benefits the Surviving Spouse after the first spouse dies. This is very different from transferring the Deceased Spouse’s assets directly to the Surviving Spouse or to their Survivor’s Trust. A Survivor’s Trust is generally revocable and the assets ultimately belong to the Survivor.
2. Why do people use Marital Trusts?
Marital Trust funding formulas can be an important part of estate tax planning, especially when federal exemption amounts were relatively low. OBBBA permanently increased the federal estate tax exemption amount to $15M per person starting January 1, 2026. Now that the federal estate tax exemption amount is so high, estate tax planning will not be a driving consideration behind most plans. Michigan does not have a state-level estate tax, but in states that do, Marital Trusts can help families make the most of their exemptions.
Marital Trusts are still useful and important, however. Some important reasons for creating a Marital Trust now are:
To ensure the Surviving Spouse is provided for, while still preserving a portion of the estate for children or other beneficiaries.
To achieve a measure of creditor protection, meaning the assets in the Marital Trust may not be accessible to the creditors of the Surviving Spouse.
To provide asset protection or control by ensuring the Surviving Spouse has their needs met while also limiting the spend-down of principal or the possibility that the Surviving Spouse redirects the assets to other beneficiaries at their death. This can be especially critical in blended-family situations.
3. Key features
Here are some of the features you’ll want to understand as you consider whether a Marital Trust is right for your family:
Who has the right to income or principal? The Qualified Terminable Interest in Property Trust (QTIP) Marital Trust, requires, at a minimum, that the Surviving Spouse receive all income for life. The Trust can provide for more generous distributions of income and principal, or can restrict principal distributions in general or upon remarriage of the Surviving Spouse.
What happens after the Surviving Spouse dies? The Deceased Spouse can give the Surviving Spouse the ability to make this determination (a power of appointment) or can designate that assets will pass to specific beneficiaries, such as children, grandchildren or charities. A power of appointment has implications for creditor protection and taxation as well.
How does it fit with your overall estate plan? In blended-family situations, in second marriages, or where one spouse has significantly more assets, a Marital Trust may help balance goals of spousal care and children’s inheritance.
State law and tax environment: Estate tax rules vary by state; some states have no estate tax while others do. If assets are held in a state with an estate tax exemption amount, the interplay matters.
4. Potential drawbacks and considerations
While marital trusts can be very useful, they aren’t right for everyone. Some of the downsides:
Complexity and cost: Setting up, funding, and maintaining the trust may require legal and financial advisor fees.
Loss of simplicity: If you have a small estate, a simpler plan might suffice.
Irrevocability concerns: After assets are placed in certain trusts, the freedom to change things may be limited. If life circumstances change, such as a new marriage, divorce, or a move to another state, the plan may become less optimal.
Tax law changes: Estate tax rules (federal & state) can change, which may affect the effectiveness of the strategy.
Spousal citizenship issues: If the surviving spouse is not a U.S. citizen, special rules apply, making the plan more complex.
5. Bottom line: Is it right for you?
If you and your spouse have significant assets, care about both supporting each other and preserving wealth for children or other beneficiaries beyond the Surviving Spouse, then a Marital Trust can be a powerful tool. It gives you flexibility, tax benefits, and control. On the other hand, if your estate is modest, your goals are straightforward (leave everything to your spouse, then your kids), and you don’t foresee complex family dynamics, the extra complexity might not be worth it.
Tips for proceeding
Meet with an estate planning attorney and a tax advisor who understand your state’s rules and your family’s situation.
Review your entire estate plan (will, living trust, beneficiary designations, retirement accounts) to ensure everything works together.
Consider who you want to benefit after the surviving spouse dies: children, charities, grandchildren, others… and ensure the trust is drafted accordingly.
Revisit your plan every 3-5 years or when major life changes occur, such as marriage, divorce, birth of children, major asset changes, or a move to another state.
Ensure the trust is funded properly: asset ownership must be transferred into the trust, now or after death, for it to work as intended.
Conclusion
When a Marital Trust is appropriate, it can truly serve as an act of love and stewardship. It provides for the needs of the Surviving Spouse while also honoring your family’s long-term vision. In blended families, it can promote harmony between the Surviving Spouse and children of the Deceased Spouse by reassuring children that inheritances will be preserved. It turns intention into structure, ensuring that what you’ve built together continues to provide comfort, clarity, and stability for years to come.
If you’d like to learn more about whether a Marital Trust might make sense for your family, we’d be honored to help. At Treetown Law, we keep relationships front and center in the planning process to ensure your plan reflects what matters most to you.
